22 March 2016, Lagos – Oil workers’ incessant protests against efforts to reform the petroleum industry, notwithstanding its numerous benefits to Nigerians, is one major issue the government has to contend with. Ejiofor Alike and Chineme Okafor report
Following the compelling need to reform Nigeria’s oil and gas sector and the delay in the passage of the Petroleum Industry Bill (PIB), which among other things, seeks to unbundle the NNPC, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu recently made audacious moves to restructure the state-run oil company, to make it a real revenue generating organisation.
Since 2000, attempts by successive administrations to reform the oil and gas sector were either halted or unnecessarily delayed due to resistance to the status quo.
While the PIB initiated in 2000 continued to suffer delay, former President Goodluck Jonathan had also initiated a key step to reform the downstream sector by his attempt to remove petrol subsidy in January 2012 but this was also resisted.
The former President’s attempt to remove subsidy, following the non-passage of the reform bill, which also seeks to remove subsidy, had prompted a backlash, resulting in labour strikes and street protests that paralysed the country’s economic and social activities.
The labour, which is averse to the change of status quo in Nigeria due to fear of job losses, with the support of the then opposition political party and the masses had mobilised against the subsidy removing, forcing the administration to reverse the decision after one week of protest.
Rationale for NNPC’s restructuring
As part of his campaign promises, President Muhammadu Buhari had vowed to overhaul the country’s oil and gas industry.
Previous administrations also saw the need for reform, hence the PIB, which three previous administrations had worked on.
But with the non-passage of the PIB to split the NNPC into several entities, the Kachikwu-led reorganisation became imperative.
Kachikwu’s pronouncement was Buhari administration’s first major attempt to reform the oil industry after the reform bill, which seeks to reform the industry, could not be passed into law by the previous administrations.
“At the end of the day, the reality is that nobody stays in public office forever, and so whatever combination you call it, at some point, Dr. Kachikwu will exit and life would have to continue but I hope that when I exit, I would be leaving a good testament in terms of what a national oil company should look like – in terms of efficiency, in terms of profit and loss (P&L) delivery and in terms of the beautiful brains that are trained up to be able to do that job. I think that is more important,” said the minister when he unveiled his plan in Abuja.
Kachikwu had at a press briefing disclosed that Buhari had endorsed the reorganisation of state oil company – the NNPC – a corporation that had reportedly operated below average amongst its peers for years now.
Viability of reorganisation
According to the minister, the corporation will henceforth operate with seven reformed groups or divisions – five business-focused divisions comprising of the upstream, downstream, refining group, gas and power, as well as, ventures group; and two non-core divisions, finance and services groups.
Before this development, the corporation had operated with 12 strategic business units responsible for exploration and production, gas development, refining, distribution, petrochemicals, engineering, and commercial investments.
But under the new arrangement, the corporation would operate with seven divisions and 20 sub-units with heads to guide their tasks.
The minister further explained that the restructuring would provide NNPC with a new break to become productive again.
Buttressing the government’s larger plan for NNPC in terms of the reform, the minister explained that issues of business efficiency and governance transparency which had reported eluded the corporation for years now would be restored through the process.
“If one man has to drive this all the way, things get lost in terms of efficiency and bureaucracy is longer. We are trying to take authority down to the basement, go meet them there with authority, let them be able to exercise it and work hard.”
“We are trying to drive these changes, trying to get this place to a point where at the end of the day, hopefully we would have through the new cast of people you are putting into these positions and working with them, they can see what the dream is and what the timelines are and it becomes easier for them to be able to continue on that sort of pace if I am not there tomorrow,” the minister had further explained.
Observation by labour, others
Less than 24 hours after Kachikwu announced the restructuring of the NNPC, both NUPENG and PENGASSAN went on strike, complaining that they had been left in the dark about the changes.
The two unions closed down two refineries, with tanker drivers and filling station operators also joining the strike.
NNPC workers also barricaded the company’s headquarters in Abuja in protest against the changes, with many filling stations in Lagos and Abuja experiencing petrol scarcity, thus paralysing traffic.
A Senior Advocate of Nigeria (SAN) and human rights lawyer, Mr. Femi Falana also argued that the reforms carried out by Kachikwu were illegal in every material particular.
“Section 2 of the Nigerian National Petroleum Act stipulates that the affairs of the corporation shall be conducted by the Board of Directors of the body. To that extent it is the board of the corporation that is saddled with the responsibility to carry out the reorganisation of the body. The board of the NNPC shall consist of the minister of petroleum resources, permanent secretary, Federal Ministry of Finance, the Managing Director of the Corporation and three other persons appointed by the President. The minister shall be the chair of the board. By virtue of section 3 of the Act the Managing Director of the NNPC shall be the chief executive and shall be responsible for the execution of the policy of the corporation and the day-to -day running of its activities,” Falana explained.
“Since the board has not been reconstituted by President Buhari the minister of state, Dr. Kachukwu has usurped its functions and has been running the affairs of the NNPC like a sole administrator. Thus, the combination of the posts of GMD of NNPC and minister of state in the ministry of petroleum resources has compounded the illegality,” Falana added.
The House of Representatives also opposed the reforms on the ground that it was illegal, insisting that it was subject to the approval by the National Assembly.
However, responding to the protest by the labour unions and the concern raised by the House of Representatives on the legality of the reform, Kachikwu, in his defence, apparently reversed himself just like the administration of former President Goodluck Jonathan was forced to reverse its decision to remove petrol subsidy in January 2012.
Kachikwu stated that NNPC had not been broken up or unbundled as erroneously reported.
He said what the president approved was the restructuring of the corporation, adding that there was nothing wrong with it as long as it was done within the confines of the law.
“NNPC has not been unbundled or broken up. It remains the same entity but with different units internally for enhanced efficiency and profitability. Besides, the NNPC Act allows for the restructuring of NNPC,” he added.
With the resistance mounted by PENGASSAN and NUPENG, as well as the National Assembly, President Buhari’s promises of overhauling the oil and gas industry may have to wait until the PIB or another enabling legislation is passed into law as this administration’s key step in overhauling the oil sector by way of restructuring the NNPC has been questioned, if not halted.
What future portends for NNPC
The NNPC and indeed, Africa’s biggest economy have paid and will continue to pay a great price for the resistance by entrenched interest to changing the status quo in the oil and gas sector.
Established in 1977 to secure Nigeria’s interests in her hydrocarbon resources, the NNPC was expected to have steadily grown its interests in crude oil exploration and production, refining, petrochemicals and products transportation.
According to its founding laws, the corporation was set up to leverage on its exclusive vantage position to mine and extract extensive values from Nigeria’s crude oil resources.
However, the consensus is that the corporation has failed in its mandate, fueling the need for a reform.
With the non-passage of the PIB, which is the legislation that would have revamped the oil and gas sector, there has been an air of uncertainty in the operating environment.
Some international oil companies (IOCs) have delayed or cancelled investments since the past eight years, with Financial Times estimating that the non-passage of the PIB had stalled $100 billion of new investment from international oil majors since 2008.
With Kachikwu’s efforts to enthrone transparency, NNPC revealed a loss of about $1.34 billion in 2015 and the fact that the figures were revealed was an indication of the success of the minister’s efforts to entrench a regime of transparency, not seen in years.
However, absence of sustained reform has stalled Nigeria’s crude oil output as it still hovers slightly above 2 million barrels per day after hitting pre-militancy level of 2.5 million barrels per day since 2005.
The absence of reform had also frustrated the country’s target to hit reserves target of 40 billion barrels and production target of 4 million barrels per day in 2010.
An obvious resistance to the compelling need for reform in Nigeria’s oil and gas sector also manifested in the apparent conspiracy against the passage of the PIB, eight years after it was submitted to the National Assembly by the late President Musa Yar’Adua.
The politics of the fiscal regime and other issues fueled resistance against the passage of this all-important legislation, thus hampering the effort towards sustained reform.
- This Day_